Gucci settles 401(k) lawsuit for $1.2 million

Luxury fashion designer Gucci America Inc. has agreed to settle for $1.2 million a lawsuit alleging it mismanaged its 401(k) plan to the detriment of employees’ retirement savings.

Heather Janda Hay, a former plan participant, alleged Gucci, which is owned by the Kering Group, breached its fiduciary duty by choosing and retaining costly and underperforming investment options for the company 401(k) plan despite there being comparable, less-expensive alternatives.

The mismanagement was “particularly egregious,” according to the plaintiff, with respect to an overreliance on investments from the plan record keeper, Transamerica Retirement Solutions, and its affiliates.

A spokesperson for Gucci didn’t return a request for comment on the settlement, which was filed last Friday in New Jersey district court and still requires court approval. It includes $800,000 for members of the class, $395,000 for plaintiffs’ attorneys, and $5,000 for the plaintiff representing the class.

The settlement in the case is notable due to the size of the 401(k) plan, which had $142 million and 3,500 participants as of year-end 2017, according to BrightScope Inc.

While excessive-fee lawsuits have proliferated over the past decade and a half, the vast majority of cases and settlements to date have involved the largest 401(k) plans with billions of dollars in assets. Health insurer Anthem Inc., which has a $7 billion 401(k) plan, recently agreed to pay $23.7 million to settle its case, for example.

Legal experts believe cases will be begin to creep down to smaller 401(k) plans — the ones retirement plan advisers tend to work with. There’s been some evidence to support that conclusion. A $25 million 401(k) plan sponsored by employer Checksmart Financial and a $9 million plan sponsored by LaMettry’s Collision Inc. were each sued in 2016. Independent broker-dealer Cetera Advisor Networks was named as a co-defendant in the Checksmart case. Both lawsuits were ultimately dismissed.